Student loan debt in the United States

The nation is still feeling the effects of the Great Recession even though economists report that it is over. Unemployment rates are still hovering around 9 percent, the economy is the number one concern for more and more Americans, and political pundits are predicting a tough re-election campaign for Barack Obama if things don’t change quickly.

An important sector of the country that is having a big impact is students graduating from a four-year university loaded with debt just as they enter their careers. And with the economy the way it is, many students can’t find jobs or jobs that pay well, so debt becomes an even bigger burden that can last for years. Many graduate students may have to default on their loans. That’s not a very good way to start adult life.

The average cost of a four-year public college for a student living in the state is $7,605 a year. The average cost of a four-year public college for an out-of-state student is $11,990 a year. And the average cost of a for-profit four-year college is $27,293 a year. And that’s for classes and room and board. There are other costs to attend school that are not covered. These include indirect costs like books, supplies, travel, personal expenses, off-campus meals, and more. All adding to the student’s load.

As a result, many students graduate from college with $20,000 in student loan debt. This is said to be an increase of 108 percent in just 10 years. Even students who graduate from a two-year technical school find themselves $10,000 in debt. Additionally, graduate students pursuing a law or medical degree are saddled with up to $100,000 in debt. Earning potential in the fields of medicine and law is said to be directly related to your debt. However, these graduate students begin their careers doing so-called hard work as residents or established law clerks. One can’t expect to make enough money to attack debt early with jobs like that.

The US Department of Education recently released a report saying recent student loan default rates are up close to 2 percent from the previous year. According to the report, for every graduating student who began repaying a loan as of October 2008, 8.9 percent were not paying their loans at the end of 2010. That’s an increase of 7 percent from students who have defaulted on their loans compared to 2007.

Some with knowledge of this subject say that one of the main reasons this happens is that the students who obtain the loans simply do not understand the loan process. In short, they are financially illiterate 18-year-old high school students who don’t know how to finance their education. As a result, they take out expensive and confusing loans.

A major topic at a recent Florida Student Financial Aid Association conference in Naples, Florida, discussed ways to educate students on how to borrow money. In addition, the process of obtaining a student loan is becoming more difficult. Fewer needy students are reportedly able to get Pell Grant loans because the current economic situation and the resulting tighter budgets are causing groups like Pell to offer fewer loans. States are also feeling the crisis. For example, in Florida, the Bright Futures scholarship program has had to reduce the scholarships it awards. Students in the top tier of recipients will receive $3,030 next school year for a 30-hour course. That is 19 percent less than the previous year.

And all of this is about to negatively impact schools. New federal government rules just announced may keep many colleges from having access to student aid money as part of a purported crackdown on schools that are leaving their students in the lurch with too much debt and doing nothing to improve their job prospects. The new rules include regulations that for-profit schools must follow to access federal financial aid money. If graduates owe too much of a percentage of their income or too few graduates at a given school are paying their loans on time, then that school could lose access to Pell grant money and other federal student aid. The result of this is that affected schools will have a harder time attracting students. This could be a huge success for a school because it is said that up to 90 percent of a school’s income can come from government aid. Under the new rules, schools will be able to receive federal financial aid if at least 35 percent of their former students are paying back their loans. In addition, a typical graduate’s estimated annual loan payment should not exceed 30 percent of the graduate’s discretionary income calculated at 12 percent of total income.

Many believe such rules will make it harder for minority and students from low-income families to access financing options and thus limit the schools they can attend.

There are grant programs available that will prevent a student from falling into a debt trap. Scholarships are available that are categorized as student-specific, subject-specific, grade-level, and minority. Common grant sources include the federal and state governments, colleges and universities, and public and private organizations.

Federal grant programs to check out include the Pell Grant, the Academic Competitiveness Grant, and the National Science and Mathematics Access Grant to Retain Talent. State grants include state-administered grant programs. For example, Michigan’s grant programs are designed to help a cross-section of students, including general college students, academically gifted students, non-traditional, and low-income adult students. Florida offers grants for the disadvantaged, disabled, Hispanic, and “academically talented.”

Minority organizations also offer grants. There are scholarship programs for African American students, scholarship programs for Hispanics, scholarship programs for Native Americans, and scholarship programs for Asian Americans. There are also scholarship programs for women.

In addition, there are groups that offer scholarships in a broader general category, including low-income and disabled students, scholarship programs for graduate and doctoral students, scholarships for undergraduate students, and scholarships for military students and families.

Lastly, there are grants for specific subjects, grants to obtain an education in a high-need field such as health care and teaching.

Bottom line, if you need financing to go to college or graduate school, educate yourself about the student loan process before you begin, and once you have a good idea of ​​how things work, do your research and explore your options, including grant programs that provide you with money that you are not expected to repay.